(USA TODAY) Is Men's Wearhouse the right fit for rival Jos. A Bank Clothiers?
The retailer -- still recovering from the June ouster of co-founder George ("You're gonna like the way you look") Zimmer -- spurned an unsolicited $2.3 billion bid from Jos. A Bank Wednesday, rejecting, at least for now, a deal that would combine the USA's leading men's specialty retailers.
Men's Wearhouse shares rocketed 28% to $45.03 Wednesday, while Jos. A. Bank's jumped 6% to $44.28.
Bank made the bid in a Sept. 17 phone call. It may have to tailor a more suitable offer. Richard Jaffe, retail analyst at Stiflel, values Men's Wearhouse at $52 a share. Houston-based Men's Wearhouse says the $48-a-share offer "significantly undervalues'' the company.
A merger would offer significant operational synergies, compelling products and brands across several price points, Jaffe said in a note to clients Wednesday. Bank would benefit from Men's Wearhouse's strong tuxedo rental business, fashionable Joseph Abboud line and the managerial expertise of Zimmer's successor, Doug Ewert, Jaffe says.
Jos. A. Bank -- best known for its "buy 1, get 2" (or more) free marketing campaigns -- said in June that it was considering acquisitions and it was storing up capital for a possible deal. But in September, the company reported fiscal second-quarter net income sank 39%. Bank sells men's tailored and casual clothing, sportswear and footwear and operates 623 stores in 44 states and the District of Columbia.
FROM JUNE: Men's Wearhouse fires founder Zimmer
ZIMMER'S OUSTER: Men's Wearhouse slams founder
Men's Wearhouse runs 1,239 stores under its signature name as well as Moores and K&G.
While smaller than its target, Jos. A. Bank has higher profit margins and a bit more upscale clientele, notes James Gellert, CEO of Rapid Ratings, an independent credit rating agency. Gellert says a merger would make sense -- whether Bank winds up as a suitor or is acquired by Men's Wearhouse.
"Any time you take two companies in a similar business, there should be cost savings in the supply chain,'' he says."This has the makings of a reasonable deal."
Zimmer, who opened his first Texas store in 1973 and had been the face of the company's marketing efforts, was ousted by his board of directors in a dispute over the direction of the company. According to recent filings, he remains one of its biggest shareholders, with a 3.7% stake. But both Zimmer and the company exchanged some harsh words following his departure.
Shoppers might not benefit from a Wearhouse-Bank merger, says Jerry Reisman, an M&A expert with law firm Reisman, Peirez,Reisman & Capobianco.
"Jos A. Bank and Men's Warehouse now compete for the same customer and often in the same or close by malls, keeping prices competitive and low and causing each to try and out sell the other at lower prices,'' Reisman says. "The merger would certainly be a loss to the consumer who has benefited from the competition and lower prices driven by competition."
Word of a potential merger propelled shares of another retailer. Destination XL Group, the largest chain selling big and tall menswear, gained 1.5% to $6.50.
Gary Strauss, USA TODAY